FHA Loan
An FHA Loan, which stands for a Federal Housing Administration Loan, is administrated by lenders, but backed by the federal government. The FHA-insured loans encourage lenders to extend credit to borrowers who might not qualify for conventional home loans.
Pros:
- 3.5% down payment minimum
- Allows buyers who may not qualify for a home loan to obtain one low down payment
- Sell can pay all of the closing costs and prepaids up to 6% of the sales prices as part of the negotiations of the contract
- Interest rates are typically less than conventional loan
- More flexible in credit and past financial history
Cons:
- Lifetime monthly MIP
- Upfront MIP fee that is rolled into the noteMonthly
- Monthly MIP is higher than conventional loan
- Size of the loan could be limited
